The Kurds had laid out bait for their prey. In early January, Kurdish
security officials spread word in the villages along Iraq's border
with Iran that one stretch of the mountainous frontier was lightly
guarded and thus safe for travelers who had reason to slip unnoticed
in or out of the country. Then the Kurds waited. "It was like
dropping seeds for a chicken, saying 'Come, come,' and then catching
it," a Kurdish official involved in the sting told TIME. It was a
crisp morning in mid-January when the chicken fell into the trap.

The tall man in an open-neck shirt, jacket and trousers looked like
any of the traveling merchants who frequent the area. When he was
stopped at a Kurdish checkpoint near Kalar, officials made an
intriguing discovery in his travel bag: two CDs and a computer flash
disc the size of a cigarette lighter. With a hunch who their catch
wasthe CIA had given them a heads-up that he might be in the
areathe Kurdish officials snapped a digital mug shot of the
traveler and e-mailed it to their American intelligence contacts. The
confirmation came back quickly: the Kurds had nabbed Hassan Ghul, one
of the key al-Qaeda operatives still on the run. "When Washington
heard we had him," said a Kurdish official in Baghdad, "they were
doing cartwheels."

The satchel was at least as important as the suspect. On one of
Ghul's discs was a 17-page progress report and future plan of action
in Iraq written to "You, noble brothers, leaders of Jihad." The author, U.S. military officials have
concluded, was Abu Mousab al-Zarqawi, whom U.S. intelligence believes
is al-Qaeda's top operative in Iraq. If the memo is what Washington
says it is, and if its author is not exaggerating, then al-Qaeda has
played a greater role in the insurgency in Iraq than anyone has
appreciated. The letter's author claims to have overseen 25 suicide
attacks against various targets in Iraq, which would constitute
almost all such assaults since the U.S. rolled into Iraq.

The report and other files captured with Ghul suggest a long-term
strategy by an international terrorism organization to turn occupied
Iraq into the front line of the global jihad. The memo, whose
discovery was first reported by the New York Times, expresses
frustration that the fight in Iraq has not been more successful as
well as concern that it will soon fail. But, as a final strategy to
upset U.S. efforts to stabilize Iraq, the memo suggests provoking
strife between the country's two main religious factionsthe Sunnis
and the Shi'itesthrough attacks on Shi'ites, who would then
presumably strike back at Sunnis. Shi'ite-Sunni discord is already
problem enough for U.S. occupation authorities without al-Qaeda's
stirring up more trouble.

Not everyone is convinced that the document found on Ghul was
authored by al-Zarqawi. Mustafa Alani, a Middle East specialist at
the Royal United Services Institute in London, believes that the
letter is from a group of religiously motivated militants working in
Iraq who are seeking an alliance with al-Qaeda. "Al-Qaeda has never
been in the habit of setting out its strategy on paper," he says.
"It's three years since 9/11, and we still haven't found one single
written document about it." U.S. officials acknowledge there is no
hard evidence that al-Zarqawi wrote the intercepted memo, but they
say they are confident in their conjecture, based on information in
the letter and the circumstances of Ghul's arrest.

Apart from the documents in Ghul's satchel, U.S. military officials
say they have other evidence that the resistance in Iraq is
increasingly being fought and led by jihadists rather than Baathists.
Since the capture of Saddam Hussein in December, officials say,
supporters of the former regime have largely given up the fight.
Their role as financiers and organizers of the diverse insurgency has
been taken up by religiously motivated groups that are recruiting
young foot soldiers to come to Iraq. It's unclear, says a U.S.
intelligence official in Washington, "how many are, quote-unquote,
al-Qaeda." But it's plain, says a U.S. intelligence official in Iraq,
"this is the battleground. It is easy to get here and easy to get
weapons."

Al-Zarqawi is a central figure in all this. French terrorism expert
Roland Jacquard notes that last month an audio recording of
al-Zarqawi turned up in extremist circles, in which he urged holy
fighters from around the world to join the fight in Iraq under his
leadership. Jacquard says Western intelligence agencies believe
al-Zarqawi has called for 1,500 to 2,000 jihadists to leave Chechnya
for Iraq.

A Jordanian, al-Zarqawi, 37, has a long record as a jihadist. As a
young man, he joined other Arab volunteers to help the Afghan
mujahedin defeat Soviet troops in the late 1980s. He is thought to
have joined up with al-Qaeda leaders in the 1990s. Eventually,
al-Zarqawi was given responsibility for rotating al-Qaeda troops
between Chechnya and Afghanistan, through the mountains of northern
Iraq. There, U.S. intelligence believes, he became the on-the-ground
commander of the well-trained extremist group Ansar al-Islam. In
defending the U.S. case for war against Iraq at the U.N. a year ago,
U.S. Secretary of State Colin Powell asserted that Saddam's regime
harbored a terrorist network headed by al-Zarqawi. That claim was
partially based on intelligence that al-Zarqawi, after sustaining
injuries in the U.S. war in Afghanistan, fled to Baghdad, where his
leg was amputated and he was fitted with a prosthesis. More recently,
Powell acknowledged that the U.S. has turned up no "smoking gun"
connecting Saddam with al-Qaeda. The memo putatively written by
al-Zarqawi disparages the Saddam regime.

Al-Zarqawi is the focus of a manhunt nearly on the scale of the
searches for Saddam and his two sons. U.S. officials say they have no
firm idea where he is, but they suspect that he is in the Sunni
triangle. Al-Zarqawi operates so inconspicuously that U.S.
intelligence is having trouble "tracking him through the traditional
ways," says an official.

The information yielded by the capture of Ghul, whom the Kurds turned
over to the Americans, may help al-Zarqawi's hunters. "The discs
[Ghul carried] were jammed," says a Kurdish security official. "You
could not fit one more single word on them." In a small, weathered
blue notebook in Ghul's satchel were names and telephone numbers from
around the world, including a few in Western countries, the source
adds. Says a U.S. intelligence official in Iraq: "We've been busy."

So too have the insurgents. Last week two suicide bombings bearing
the hallmarks of al-Qaeda together killed more than 100 people; the
attacks were targeted at centers where applications for new Iraqi
policeman and soldiers were being taken. In another assault,
guerrillas shouting "God is great" besieged an Iraqi police station
and security compound in Fallujah, freeing prisoners and killing at
least 21 people. The letter found on Ghul identifies four general
targets for attack: Americans; Kurds; "Iraqi troops, police and
agents"; and Shi'ites.

The letter describes the plan to foment violence between Shi'ites and
Sunnis as a last-ditch effort by the resistance. The author complains
of various obstacles: that the U.S. won't leave Iraq "no matter how
many wounds it sustains," that Iraqis offer hospitality but "will not
allow you to make their homes a base for operations or a safe house,"
that "our enemy is growing stronger day after day, and its
intelligence information increases." He laments, "By God, this is
suffocation!" The writer argues that the resistance has only a
limited time in which to actuntil the U.S. confers sovereignty on a
new Iraqi government, a turnover planned for June. "We are racing
against time," he says. Once democracy is in place, "we will have no
pretexts," he argues. "If, God forbid, the [new Iraqi] government is
successful and takes control of the country, we will just have to
pack up and go somewhere else again."